NDMC (Determination of Annual Rent) Bye-Laws, 2009 – Writ petitions filed by respondents-assesses challenging the constitutional validity of the 2009 Bye-laws – Impugned Bye-laws lay down the procedure for determining the rateable value inter alia on the basis of Unit Area Method (UAM) altering the earlier system of determining the rateable value on the basis of the annual rent – Bye-laws challenged by respondents inter alia on the ground that the UAM of fixing the annual value was foreign to s.63 of the 1994 Act – NDMC contended that since s.63, 1994 Act does not prescribe any particular method for arriving at annual rent therefore, this gap was filled by the Bye-laws by prescribing the formula based on UAM – High Court declared the Bye-laws as ultra vires the 1994 Act – On appeal, held: Rateable value means value of any land or building fixed in accordance with the provisions of 1994 Act and the Bye-laws made thereunder for the purposes of assessment of property taxes – S.63, 1994 Act stipulated that the rateable value of any land or building assessable to property tax shall inter alia be the annual rent at which such land and building might reasonably be expected to let – s.63(1), 1994 Act is not silent on how to determine the annual rent of a property – This annual rent has to be the one which the land or the property ‘might reasonably be expected to let from year to year’ – Yardstick is the ‘letting’ – It is the annual letting value which can be the annual rent and not the value of the property in question – Manner in which the rateable value is fixed under the Bye-Laws is not in sink with the scheme of s.63(1) of the 1994 Act – Bye-Laws are foreign to the methodology provided in s.63 of the 1994 Act and thus, ultra vires the provisions of 1994 Act – However, in exercise of powers u/Art.142 of the Constitution, it is directed that assessees who have paid the tax as per Bye-Laws, 2009, being satisfied with the assessments under the impugned Bye-laws, their assessments shall not be reopened – However, this will not apply to the respondents who were writ petitioners in the High Court – In their cases, the direction given by the High Court in the impugned judgment shall prevail – New Delhi Municipal Council Act, 1994 – ss.2(42), 60-63, 65-67, 70, 81, 388(1)(A)(9),391(1) and 416(2)(a) – Delhi Municipal Corporation Act, 1957 – NDMC House Tax Bye-Laws, 1962 – Delhi Municipal Corporation (Property Taxes) Bye-Laws, 2004 – Constitution of India – Arts.14 and 142. New Delhi Municipal Council Act, 1994 – ss.2(42), 61-63, 65-67, 70, 72, 73 and 81 – Essence of – Discussed. Words & Phrases – “annual rent” & “ annual value”– Difference between– Discussed.
Disposing of the appeals, the Court
HELD: 1.1 Under Section 61 (1) of the NDMC Act, 1994 property tax shall be levied on lands and buildings in New Delhi and “shall consist of not less than ten and not more than thirty per cent of the rateable value of lands and buildings.” The proviso to Section 61(1) of the NDMC Act states that the NDMC may, “when fixing the rate at which the property tax shall be levied during any year, determine the rate leviable in respect of lands and buildings or portions of lands and buildings in which any particular class of trade or business is carried on shall be higher than the rate determined in respect of other lands and buildings or portion of other lands and buildings by an amount not exceeding one-half of the rate so fixed.” The second proviso to Section 61
(1) states that “the tax may be levied on graduated scale, if the Council so determines.” The explanation to Section 61 (1) states that “where any portion of a land or building is liable to a higher rate of the tax such portion shall be deemed to be a separate property for the purpose of municipal taxation.” Under Section
61 (2) of the NDMC Act, the NDMC can exempt from tax the lands and buildings where “the rateable value does not exceed Rs.1,000.” [Para 21, 22] [355-G-H; 356-A-C]
1.2 The expression ‘rateable value’ is defined under Section
2 (42) of the NDMC Act to mean “the value of any land or building fixed in accordance with the provisions of this Act and the Byelaws made thereunder for the purpose of assessment to property taxes.” [Para 23] [356-D]
1.3 Section 62 of the NDMC Act relates to the ‘Premises in respect of which tax is to be levied’. Section 62 (1) lists out such lands or buildings or portions thereof which will not be subject to levy of property tax. This includes lands exclusively occupied and used for public worship or by a society or body for a charitable purpose. It also includes lands and buildings vested in the NDMC in respect of which the tax, if levied, would be leviable primarily on the NDMC and agricultural lands and buildings (other than dwelling houses). Section 62 (3) clarifies that if a portion of the land or building is exempted from property tax by reason of the exclusive use or occupied for public worship or charitable purpose then such portion “shall be deemed to be a separate property for the purpose of municipal taxation.” [Para 24] [356-E-F]
1.4 Section 63 of the NDMC Act sets out the method of determination of the rateable value of lands and buildings assessable to property tax. Section 63 (1) provides that the rateable value of any land or building assessable to property tax shall be the annual rent at which such land or building might reasonably be expected to let from year to year less a sum equal to 10% of the said annual rent which shall be in lieu of all allowances for cost of repairs and insurance, and other expenses necessary to maintain the land or building in a state to command that rent. The proviso to Section 63 (1) of the NDMC Act states that in respect of any land or building the standard rent of which has been fixed under the Delhi Rent Control Act, 1958 (‘DRC Act’), the rateable value thereof “shall not exceed the annual amount of the standard rent so fixed.”. Section 632) of the NDMC Act states that the rateable value of any land which is not built upon but is capable of being built upon and any land on which a building is in process of erection “shall be fixed at five per cent of estimated capital value of such land.” Under Section 63(3) the Chairperson of the NDMC can by public notice, with the approval of the NDMC, specify a plant and machinery which will be deemed to form part of such land and building for the purposes of determination of rateable value. Section 65(1) of the NDMC Act clarifies that lands and buildings being properties of the Union shall be exempt from the property tax specified in Section 61 of the NDMC Act. [Paras 25, 26] [356-G-H; 357-A-D]
1.5 Section 66 of the NDMC Act speaks of the incidence of the property tax. It is primarily on the lessor if a building or land is given on lease. It is on the superior lessor if the land or building is given on a sub-lease. If it is not leased then on the person on whom the right to let the same vests. Section 67 of the NDMC Act talks of apportionment of liability of the property tax when the premises are let or sub-let. Section 68 clarifies who will be primarily liable for the property tax due in respect of any land or building and in the event of default of the person liable to pay such propertytax as specified in Section 66. It is clarified that this would be the occupier of such land or building. [Paras 27, 28] [357-D-F]
1.6 Section 70 of the NDMC Act deals with the ‘Assessment List’. This is a list of all lands and buildings which contains such particulars with respect to each land and building as may be prescribed by the Bye-laws. When such Assessment List is prepared, the Chairperson under Section 70 (2) of the NDMC Act gives a public notice thereof and every person claiming to be an owner, lessor or occupier of a land or building included in the List shall be at liberty to inspect the List and take extracts therefrom free of charge. Under Section 70 (3), the Chairperson is to give a public notice of a date not less than one month thereafter when he would proceed to consider the rateable value of the lands and buildings entered in the Assessment List. He is also to give the written notice where the rateable value is proposed to be increased. Section 70 (4) of the NDMC Act provides for objections to be filed to the Assessment List in writing to the Chairperson. Section 70 (5) of the NDMC Act talks of an objection being notified into and investigated, and the person making them shall be allowed an opportunity of being heard either in person or by authorised agent before the final Assessment List is prepared under Section 70 (6) of the NDMC Act. Section
72 of the NDMC Act provides for amendment of the Assessment List and Section 73 for preparation of new Assessment List. Under Section 81 the Chairperson of the NDMC Act employs valuers to give advice or assistance in respect of valuation of any land or building. [Paras 29, 30] [357-F-H; 358-A-C]
1.7 Section 60, NDMC Act is the charging Section which authorizes the NDMC to levy various types of taxes including property tax. As per sub-section (3), tax can be assessed and collected in accordance with the provisions of the Act and Byelaws made thereunder, rates at which the property tax can be charged are mentioned in Section 61. This Section, inter alia, provides that the property tax shall be levied on lands and buildings in New Delhi and shall consistent of not less than 10% and not more than 30% of the rateable value of lands and buildings. Thus, property tax can be charged on lands and buildings for which rates can be prescribed and these rates have to be between 10% to 30%. Further, this percentage is of the ‘rateable value’ of lands and buildings. Definition of ‘rateable value’ is given in Section 2(42) of the NDMC Act to mean ‘the value of any land or building fixed in accordance with the provisions of this Act and Bye-laws made thereunder for the purposes of assessment to property taxes’. Various premises, viz: lands and buildings, in respect of which property tax can be levied are mentioned in Section 62. The manner of determination of rateable value is specified in Section 63 of the Act. [Paras 67, 68] [376-E-H; 377-A-B]
1.8 As per Section 63(1), NDMC Act rateable value of any lands or building assessable to any property taxes is the ‘annual rent’. Further, such annual rent has to be determined ‘at which such land or building might be reasonably be expected to let from year to year….’ .The ‘rateable value’, as per Section 2(42) of the NDMC Act is to be fixed in accordance with the provisions of the Act and the Bye-laws made thereunder. Section 63 prescribes that ‘annual rent’ would be rateable value. This annual rent, as per this provisions, is one such land or building is expected to let from year to year minus 10% thereof. The Impugned Byelaws lay down the procedure for fixing of annual rent on UAM. [Paras 69, 70] [377-G-H; 378-A]
1.9 Section 63(1) is not silent on how to determine the annual rent of a property. This annual rent has to be the one which the land or the property ‘might reasonably be expected to let from year to year’. It is, thus, based on the letting yearly value of the property. [Para 71] [378-D]
1.10 Annual rent is to be the one which the landlord might realize if the house was let. The criteria, thus, is the rent realizable by the landlord and not the value of the holding. The test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant. [Para 77] [380-C-D]
1.11 Even in common parlance, simple language of Section 63(1) clearly conveys that the rateable value is the annual rent which the property is likely to fetch. The yardstick is the ‘letting’. Two words used in this Section convey this meaning very clearly, namely, the word ‘rent’ in the phrase ‘annual rent’ and the word ‘let’. Therefore, annual rent is to be determined on the basis of the letting value which is expected reasonably. In cases where the property is already let out, actual rate at which the property is let out becomes the amount at which the land or building is reasonably expected to fetch. Exception may be those cases where the property is let out actually at a rent which is lesser than the rent it would be fetched otherwise. In case there is a proof and/or material to find out that the reasonable rent could have been more than at which it is actually let out, the actual rent receipt can be discarded by adopting the expected rent which, on the basis of material, can be said to be reasonable. In those cases where the property is self-occupied or is vacant and not let out, it can be gathered from the rent at which a comparable property is let out. However, in such a case there would be two situations. Going by the dicta laid down in Dewan Daulat Rai Kapoor and other cases, the reasonable rent would be the standard rent which can be determined under the provisions of Delhi Rent Control Act. However, this principle would be applicable only in respect of those properties where Delhi Rent Control Act applies. In other cases, the yardstick would be the letting value of comparable properties, i.e., the rent at which comparable properties are let out. However, such criteria of fixation of standard rent has lost its relevance after the judgment of the Delhi High Court in Raghunandan Saran Ashok Saran (HUF) vide which Sections 4,6 and 19 of the Delhi Rent Control Act which deal with fixation of standard rent, were declared as ultra vires of the Constitution of India. The aforesaid decision has been affirmed by this Court in State Trading Corporation of India Ltd. Case. [Paras 79, 81] [380-G-H; 381-A, F-H; 382-A-C]
1.12 The expression ‘annual rent’ is to be read in contradistinction to ‘annual value’. Two concepts are altogether different. Inasmuch as the latter expression relates to annual value of the property which may be based on parameters different from fixing the annual rent of the property. After going through the Bye-laws and the manner in which the rateable value is fixed, it is observed that it not in sink with the scheme of Section 63(1) of the NDMC Act. Bye-law 4 stipulates that the bona fide annual value of land not covered under Bye-law 3 would be the annual value of land and bona fide annual value of the covered space of the building. Bye-law 3 seeks to fix the entire value of land falling in the jurisdiction of New Delhi at the circle rate of Rs. 43,000/(Rupees Forty Three Thousand only) per square meter. Likewise, Bye-law 4(10) where annual rent of any building is determinable under more than one-sub-bye-law, the annual rent shall be the aggregate of the annual value determined under sub-bye-law of this Bye-law. The arguments of the appellants is therefore rejected and it is not deemed necessary to deal therewith any further. [Paras 82, 83] [382-C-G]
1.13 The Impugned Bye-laws are ultra vires the provisions of NDMC Act. They are in excess of the scope and ambit of powers vested in the NDMC Act under Section 388(1)(A)(9) of the NDMC Act. As rightly contended by the assessees, initially, same was the thinking process in the NDMC as well inasmuch as there was a move to amend the Act in order to bring UAM for the purpose of levying property tax. This is how the Municipal Corporation of Delhi achieved its objective. However, for the reasons best known to the appellants, without amending the provisions of the Act it went ahead in bringing Impugned Byelaws, 2009. [Paras 84, 85] [382-H; 383-A-C]
2.1 In many ways, UAM is a better method in comparison with the earlier method based on annual rent. For this reason, this method has now been followed for the purpose of levying property tax not only in the areas in Delhi itself covered under the Municipal Corporation of Delhi but in many other States as well. However, such a method which may be a better method can be incorporated in accordance with the law. In the present case, it could be done after amending the provisions of the NDMC Act. Since, the High Court which has quashed the Impugned Byelaws as ultra vires is agreed with, it becomes meaningless and irrelevant to go into other issues or other arguments advanced. However, once the appellants take steps for amending the Act and want to reintroduce the Bye-laws of 2009, many aspects highlighted by the assessees in respect of Bye-laws would be kept in mind. It is not being suggested that the contentions raised by the respondents/assessees relating to validity of different Byelaws are well-founded, nor it is being suggested that they are illconceived. Supreme Court has not expressed any views on the merits of these contentions, either way as this Court has not gone into the merits of such contentions. At the same time in order to obviate any future challenge the NDMC is expected to keep in mind the arguments of the appellants on these aspects. [Para 86][383-C-G]
2.2 When the matter came up on 6 th March, 2018, a statement on behalf of NDMC that the revised guidelines have been framed and put on website, to which objections have been invited. It was also stated that after receiving and considering the objections, the matter would be finalized at NDMC’s end. The respondent/assessee and some others also submitted their objections to the modified guidelines. These were looked into by the NDMC and decision thereon was taken by the Chairperson, NDMC under Bye-law 5(2) of the Impugned Byelaws after the Valuation Committee had given its recommendations for the year 2018-19. This decision dated 14th May, 2018 of the Chairperson was handed over to the Court. As per this, various objections of the assessees were considered and decision taken thereon. Many respondents/ assessees are still not satisfied with the decision taken on various aspects and the arguments. However, it is left to the NDMC to take a final call thereupon having due regard to the legal position on these aspects. [Para 88] [384-F-H; 385-A]
2.3 The declaration of Impugned Bye-laws as ultra vires has created a difficult situation. These Bye-law were framed in the year 2009. They were struck down by the High Court vide impugned judgment dated 10th August, 2017. They held the field from 2009-2017. While issuing notice in these Special Leave Petitions on 22nd September, 2017, in respect of the direction of the High Court to pass re-assessment order, this Court observed that it would be open to the NDMC not to pass such re-assessment orders. That interim order has prevailed during the pendency of these appeals. Further, as already noted above, 95% of the assessees are agreeable to pay the tax as per Bye-laws 2009. They have even paid the taxes on that basis. In these circumstances, to upset the applecart completely may not be appropriate. In such a peculiar situation, in exercise of powers under Article 142 of the Constitution, it is directed that those assessees who have paid the tax as per Bye-Laws, 2009, their assessments shall not be reopened. Another reason for taking this course of action is that these assessees are satisfied with the assessments under Bye-laws, 2009. However, it will not apply to the respondents herein, namely, those assessees who were the writ petitioners in the High Court. In their cases, the direction given by the High Court in the impugned judgment shall prevail. [Para 89] [385-B-E]
State Trading Corporation v. New Delhi Municipal Council (2016) 12 SCC 603 ; The Corporation of Calcutta v. Smt. Padma Debi and Others [1962] 3 SCR
49 ; The Guntur Municipal Council v. The Guntur Town Rate Payers’ Association etc. (1970) 2 SCC 803 ; Dewan Daulat Rai Kapoor v. New Delhi Municipal Council and Others (1980) 1 SCC 685 : [1980] 2 SCR 607 ; Indian Automobiles Ltd. v. Calcutta Municipal Corporation and Anr. (2002) 3 SCC 388 : [2002] 1 SCR 961 – relied on.
State Trading Corporation of India Ltd. v. New Delhi Municipal Council AIR 2003 Delhi 295 ; Ashok Singh v. Asstt. Controller of Estate Duty (1992) 3 SCC 169 : [1992] 3 SCR 190 ; Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd.(1972) 2 SCC 560 : [1973] 1 SCR 822 ; Mafatlal Industries & Ors. v. Union of India & Ors. (1997) 5 SCC 536 : [1996] 10 Suppl. SCR 585 ; Raghunandan Saran Ashok Saran (HUF) v. Union of India and Others 95(2002) DLT 528 ; P. Ratnakar Rao and Others v. Sate of A.P. and Others (1996) 5 SCC 359 : [1996] 2 Suppl.SCR
866 ; Pradeep Oil Corporation v. Municipal
Corporation of Delhi and Anr. (2011) 5 SCC 270 : [2011] 4 SCR 764 ; Municipal Corporation of Delhi v. Shashank Steel Industries (P) Ltd. 100 (2002) DLT 66 (FB) ; State of Kerala v. Haji Kutty AIR 1969 SC
378 : [1969] 1 SCR 645 ; NDMC v. State Trading Corporation, 126 (2006) DLT 191 ; Government
Servant Cooperative House Building Society Limited and Others v. Union of India and Others (1998) 6 SCC
381 : [1998] 3 SCR 996 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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